AG’s Office reportedly investigating Sutter Health

Sutter Health made national headlines Friday when the Wall Street Journal reported that the California Attorney General’s Office is probing Del Norte’s sole hospital operator as part of “a broad investigation into whether growing consolidation among hospitals and doctor groups is pushing up the price of medical care ...”

“The probe, which has been under way for several months, is examining hospital systems’ reimbursement from the insurers ... The regulator appears to be focusing on whether the systems’ tie-ups with physicians, as well as ownership of hospitals, have given them the market power to boost prices in a way that violates antitrust law,” the Journal report states, attributing the information to anonymous sources “with knowledge of the matter.”

These sources told the Journal that Sacramento-based Sutter Health was on a short list of multi-billion-dollar, non-profit hospital operators that got subpoenas from the office of Attorney General Kamala D. Harris. The article mentions San Francisco-based Dignity Health, San Diego’s Scripps Health and Sharp HealthCare, Santa Barbara-based Cottage Health System, and additionally, major health insurers.

Locally, Sutter Coast Hospital has come under heavy fire this year after administrators and local volunteers on its Board of Directors agreed to dismantle a community-based governance structure and consolidate with the West Bay region, an umbrella heading for five hospitals and two doctor groups.

A contingent of local doctors opposed the business plan. The outcry has been considerable and legal sparring between Sutter Health and Del Norte’s public entities is under way.

Defenders of the corporate merger have said hospital-based doctor groups are important for physician recruitment, especially in places like Del Norte, where two such foundations are already employing much-needed specialists and primary care physicians.

Others say these groups skirt a state law banning corporate interests from cutting physician paychecks and in the process shaping patient care.

Nationwide nearly a quarter of all specialty physicians seeing hospital patients are now employed by the facility, more than four times the five percent in 2000. Among primary-care doctors who see patients in hospitals, the hospital-based share has doubled to about 40 percent in the same time frame, according to data cited by the Journal.

Statewide, scrutiny of Sutter Health’s model has increased since the corporation started consolidating its string of Northern California hospitals in 2008.

In a 2009 letter to then-Attorney General Jerry Brown, 13 California lawmakers, including State Assemblyman and North Coast congressional hopeful Jared Huffman, called for an investigation in to “allegations of misrepresenting hospital finances, economic and medical red-lining, abuse of non-profit status, anti-trust violations, questionable allocations of public assets and execution of contracts that may be in conflict with existing law.”

State attorneys general can use federal antitrust law to challenge acquisitions or behavior that they consider anti-competitive, including already-done deals as late as four years down the road, this week’s Journal article notes. However, in 2000 a federal judge rebuffed a previous California attorney general’s effort to block Sutter from acquiring a financially strapped Oakland hospital on antitrust grounds.

Local doctors opposed to Sutter Coast’s consolidated governance plan have cited the hospital’s comparatively high prices as part of the mounting reasons to look elsewhere for management, a proposed divestiture the Del Norte County Board of Supervisors has asked the hospital’s local board of directors to address.

At a July public meeting, Sutter Coast Hospital CEO Eugene Suksi told attendees: “Sutter Health is going to be consolidating a lot of their support services so they can reduce costs and reduce charges, the costs to access care,” adding that this was already well under way, independent of the potential merger called “regionalization.”

He brought a couple of explanatory hand-outs to the town hall meeting, one entitled “Consolidation reduces Cost.”

Meanwhile some research suggests that mergers drive up health-care consumer prices.

A 2010 study published in the journal Health Affairs said concentration among health-care providers in California had led to “a definite shift in negotiating strength toward providers, resulting in higher payment rates and premiums.”

An evaluation of the Health Affairs study funded by the American Hospital Association said it was flawed because it relied on “anecdotal observations” and didn’t adequately examine such factors as consumer preference that could lead to differences in hospital reimbursement, the Journal writes.

The local hospital’s chief staff has lately disseminated thousands of copies of a “fact sheet” he penned in opposition to corporate consolidation.

In it, orthopedic surgeon Dr. Greg Duncan writes that “Sutter Coast’s charges have always been much higher than those at surrounding facilities. Sutter Coast charges over $3,330 for a knew MRI scan, which is three times the cost of the same test in Medford, Ore.”

As for the attorney general’s investigation into anti-trust breaches, a spokesperson for Sutter Health told the Journal it generally comments “only on matters of public record” and, when asked about investigations, “defers to the regulatory party.”

Reach Emily Jo Cureton at
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it